While you were sleeping: Stocks, oil drop

While you were sleeping: Stocks, oil drop

Aug 13
(BusinessDesk) - Equities on both sides of the Atlantic slid
as investors eyed developments in Ukraine and Iraq and their
impact on the global economy.

The price of oil dropped
after the International Energy Agency cut its 2014 global
oil demand growth forecast to 1.0 million barrels per day on
lowerthanexpected deliveries in the second quarter and
the International Monetary Fund's weaker outlook for
economic growth.

“Despite armed conflict in Libya, Iraq
and Ukraine, the oil market today looks better supplied than
expected, with an oil glut even reported in the Atlantic
Basin,” the IEA said in its Oil Market Report for August,
Bloomberg News reported.

Declines
in shares of Chevron and Cisco Systems, down 0.9 percent and
0.8 percent respectively, led the Dow lower.

"We already
know the Middle East is unstable and that Russia is sending
an aid convoy to Ukraine, so this is all the continuation of
a longer-term issue that has been boiling for a long
time,” Malcolm Polley, president and chief investment
officer of Stewart Capital Advisors in Indiana,
Pennsylvania, told Reuters.

Shares of Kate Spade tanked,
last down 25.7 percent to US$28.90 after rising as high as
US$42.87 earlier in the day, as concern about shrinking
margins overshadowed better-than-expected revenue.

On a
post-earnings conference call on Tuesday, the company said
it expects 2014 gross margins to decline 125 to 175 basis
points from a year earlier, Reuters reported.

An auction
of US three-year notes drew solid demand for safe-haven
assets, reflecting concern about the impact of conflict in
the Ukraine, Iraq, and Gaza.

“You’ll see a lot of
demand stemming from geopolitical events,” Aaron Kohli, an
interest-rate strategist at BNP Paribas in New York, a
primary dealer, told Bloomberg News. “Investors are
worried about the instability.”

In Germany, a report showed investor
confidence weakened for the eighth month in a row. The ZEW
index of investor and analyst expectations plunged more than
expected, sliding to 8.6 in August, from 27.1 in July. The
euro weakened against the US dollar and the Japanese yen as
a result.

“The drop in the ZEW index confirms the
near-term downside risk for the German and euro-zone
economies emanating from the Ukraine crisis,” Christian
Schulz, senior European economist at Berenberg Bank in
London, told Bloomberg News. “The ‘Putin factor’ could
lead to more cautious investment plans for a
while.”

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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